347 U.S.

89
74 S.Ct. 414
98 L.Ed. 532

PARTMAR CORP. et al.

v.
PARAMOUNT PICTURES THEATRES CORP. et al.
No. 17.
Argued Oct. 13, 1953.
Decided Feb. 8, 1954.
Rehearing Denied March 15, 1954.

See 347 U.S. 931, 74 S.Ct. 527.

[The balance of this page left blank]
Mr. Russell Hardy, Washington, D.C., for petitioners.
Mr. Jackson W. Chance, Los Angeles, Cal., for respondents.
Mr. Justice REED delivered the opinion of the Court.

This case presents a matter of federal practice involving inconsistent positions

by litigants in court proceedings. We have often held that under the doctrine of
res judicata a judgment entered in an action conclusively settles that action as to
all matters that were or might have been litigated or adjudged therein.1 But a
prior judgment between the parties has been held to operate as an estoppel in a
suit on a cause of action different from that forming the basis for the original
suit 'only as to those matters in issue or points controverted, upon the
determination of which the finding or verdict was rendered.'2 This latter aspect
of res judicata is the doctrine of collateral estoppel by judgment, established as
a procedure for carrying out the public policy of avoiding repetitious litigation.

Petitioners entered counterclaims in a suit against them by respondent. These

counterclaims were dismissed by the trial court upon determination of the
original suit for petitioners and against respondents. The cause of action stated
in petitioners' counterclaims is based upon a controverted personal right that

had not been adjudged and therefore res judicata is no bar to the claimed right
of recovery. Respondent, however, in its original suit had raised an issue,
determinative of its cause of action, which had been therein successfully
controverted by petitioners to final judgment on the merits. Collateral estoppel
stands as a bar to further litigation by the parties of this issue, and this issue was
held by the trial court to be determinative of petitioners' counterclaims.
Petitioners' argument that the dismissal denied a hearing of issues that might
have been but were not determined by the judgment on the merits of the
original action moved us to grant certiorari, limited to the issue of the
counterclaims. 345 U.S. 963, 73 S.Ct. 948, 97 L.Ed. 1382.
3

Although federal jurisdiction was sought only on the ground of diversity, the
complaint relied upon a breach of the Sherman Act, and the counterclaims were
similarly bottomed on that federal law. Therefore our conclusion is reached on
a consideration of federal law and procedure. It will depend upon whether or
not any issue of fact or law remained for decision after the primary action was
decided.3 The issue reaches us under the following circumstances.

Paramount Pictures Theatres Corp., a subsidiary of Paramount Productions,

Inc., and successor to Paramount Pictures, Inc., is a New York corporation
engaged in the business of operating motion picture theatres throughout the
United States. These three corporations will hereinafter be referred to jointly as
'Paramount.' On August 31, 1939, Paramount leased the Paramount Downtown
Theatre in Los Angeles, California, for ten years to Partmar Corp., a California
corporation, petitioner here, wholly owned by Fanchon & Marco, Inc. This
lease was subsequently amended in 1942 and extended to March 18, 1952. A
'film franchise agreement' was executed in conjunction with, and for the same
period as, the lease. It licensed Partmar to exhibit Paramount pictures at the
theatre as first 'runs' of the films, required Partmar to exhibit such pictures not
less than forty-six weeks each year, and set a scale of license fees. The lease
expressly provided that it was terminable at the option of Paramount if the
franchise agreement 'be cancelled or terminated for any reason whatsoever.'
Other provisions of the lease and agreement are not germane to the issue before
this Court.

On December 31, 1946, a decree was entered in the District Court for the
Southern District of New York in an equity action brought by the United States
against Paramount and other major companies of the motion picture industry
alleging a conspiracy to violate the Sherman Act, 26 Stat. 209, 15 U.S.C. 1
2, 15 U.S.C.A. 12. United States v. Paramount Pictures, Inc., D.C., 70
F.Supp. 53. One provision of that decree defined a 'franchise' to be a licensing
agreement 'in effect for more than one motion picture season and covering the

exhibition of pictures released by one distributor during the entire period of

agreement' and enjoined each of the defendants in that action 'from further
performing any existing franchise to which it is a party and from making any
franchises in the future.' 70 F.Supp. at page 73, Decree, II, 5.
6

On March 26, 1947, Paramount notified Partmar that it was cancelling and
terminating the franchise agreement because of the injunction, and on April 2,
1947, notified Partmar that it was terminating the lease by reason of the
termination of the franchise agreement. Partmar refused to vacate the theatre
upon demand, and Paramount instituted this action on May 1, 1947, in the
District Court for the Southern District of California, alleging diversity and
unlawful detainer of the theatre. The complaint sought, so far as is material
here, restitution of possession based on illegality of the franchise under the
Sherman Act as construed in the decree in the Southern District of New York,
supra, and a declaratory judgment that the lease had been properly terminated.

Partmar and Fanchon & Marco, Inc., answered setting up various defenses and
filed three counterclaims seeking treble damages under 38 Stat. 731, 15 U.S.C.
15, 15 U.S.C.A. 15, resulting from a conspiracy between Paramount and
other motion picture companies in violation of the Sherman Act. The
conspiracy was alleged to have resulted in the imposition of excessive terms
and conditions on Partmar by the lease and franchise agreement.4

By order dated April 26, 1948, the District Court, upon Paramount's motion,
ordered Paramount's causes of action for unlawful detainer and declaratory
judgment tried separately from Partmar's counterclaims. Prior to trial on May 3,
1948, we handed down our decision on Paramount's and the other defendants'
appeals from the decree of the Southern District of New York. United States v.
Paramount Pictures, Inc., 334 U.S. 131, 68 S.Ct. 915, 92 L.Ed. 1260. We held
inter alia that 'we cannot say on this record that franchises are illegal per se
when extended to any theatre or circuit no matter how small' and set aside the
District Court's findings relative to such franchises. 334 U.S. at page 156, 68
S.Ct. at page 928, 92 L.Ed. 1260. Relying on that decision Partmar and
Fanchon & Marco, Inc., moved in the Southern District of California for
dismissal of Paramount's action against them. Their motion was denied and the
case went to trial without amendment of the pleadings in November 1950, on
two issues: whether Paramount was justified in terminating the franchise
agreement because of the decree in the New York Paramount case, supra;
whether the lease and contract were illegal contracts under the federal antitrust
statutes justifying repossession of the theatre by Paramount under California
law. See, e.g., Glos v. McBride, 47 Cal.App. 688, 191 P. 67. Thus issue was
joined as to the legality of the actions of Paramount and its alleged co-

conspirators relative to the lease and franchise agreement, wholly apart from
the New York injunction, and Paramount was in the anomalous position of
attempting to prove that its agreements with Partmar violated the antitrust laws.
Paramount did not limit its contention of illegality of the agreement to
nonconspiratorial aspects of the antitrust laws, but argued that if the agreements
were illegal in any way it had the right to possession. That Partmar recognized
this position is clearly shown by its statement in its brief to the trial court that
'after the reversal of that judgment (in the New York case), the plaintiff
(Paramount) took the position that the question presented was whether the
franchise was violative of the Sherman Act, wholly apart from any judgment or
the decisions of the District or Supreme Courts.' Partmar vigorously contended
in brief and in argument that the lease of the theatre and the franchise for 'firstrun' exhibitions did not in any way violate the Sherman Act. It clearly
recognized that one way the franchise might be illegal would be if it were the
result of a conspiracy for it argued in its brief that:
9

'There was no allegation or proof of conspiracy. There being no showing of

interstate commerce, it is immaterial whether there was conspiracy,
unreasonable clearance, fixed admission prices, block booking, or unreasonable
restraint. In the absence of interstate commerce, all else was entirely beyond
the purview of the Sherman Act. But, assuming that there had been no failure to
prove interstate commerce, the absence of conspiracy is equally fatal. Probably
the only evidence relative to conspiracy was the statement of Y. Frank
Freeman, a witness for Paramount, that there were no conspiratorial
arrangements between Paramount and Fox West Coast. * * * Even in a setting
of conspiracy, it is doubtful that the franchise would be unlawful. * * * On the
evidence in this case the Partmar franchise is neither one of a system, or made
by one holding a dominant position, or pursuant to a conspiracy * * *.'

10

It thus insisted that the remunerative lease and franchise agreements were still
valid and subsisting, and that Paramount had no right to possession.

11

After eighteen days of trial the District Judge on May 2, 1951, filed a
memorandum opinion, D.C., 97 F.Supp. 552, 555, in which he concluded that
the termination 'for any reason' clause in the lease meant for any 'legal or
substantial reason,' and that the 1946 decree of the Southern District of New
York 'was not a legal cause or reason for terminating the franchise agreement.'
He continued, 'there is no evidence to indicate that any third party conspired
with either Paramount or Partmar to bring into existence the franchise
agreement', that 'a single contract between one film company and one exhibitor
is not violative of the Sherman Act', and that, since the franchise agreement
was 'not in itself an illegal agreement', Paramount 'had no right to cancel or

terminate it because of illegality.' The court went on to hold that 'as we find no
substantial evidence of a conspiracy in this case on the part of Partmar or
Paramount, we are of the opinion that the counter-claimant cannot recover' on
the counts seeking treble damages on the basis of an alleged conspiracy. The
opinion directed Partmar to submit proposed findings of fact, both parties
submitted such findings and proposed conclusions, and a hearing, upon notice,
was held on June 18, 1951. Paramount thereupon submitted Finding No. 20 and
conclusion No. 11, infra, thus formalizing its contention that the judgment
denying plaintiff's petition estopped defendant from recovering on its
counterclaims for violation of the Sherman Act. At this hearing Partmar
appeared and expressly objected to the adoption of the proposed finding and
conclusion which required the dismissal of its treble damage counterclaims.
Argument was heard on Partmar's objection, but the court adhered to its
position and adopted among its findings No. 20 which provides:
12

'Paramount, not in conjunction with any other major studio, entered into the
franchise agreement which gave to Partmar the right to exhibit the first-run
feature pictures of Paramount in the City of Los Angeles. Neither said franchise
agreement, nor said lease, nor any amendment to either of them constituted any
part of, nor were they or any of them entered into as a result of any agreement,
combination or conspiracy of any kind whatsoever between Paramount and any
other person or persons, nor between Partmar and any other person or persons.'
And conclusion No. 11 which provides:

13

'Inasmuch as the said lease and said franchise agreement and all amendments to
each of them were in all respects lawful and were not entered into nor
performed as a result of any combination or conspiracy of any kind whatsoever
on the part of either plaintiffs, defendants, third party plaintiff or third party
defendants, with any person or persons; inasmuch as said lease, said agreement
and amendments thereto have neither the purpose or effect of restraining or
monopolizing trade or commerce among the several states in the production,
distribution, transportation, sale or exhibition of motion pictures; and inasmuch
as each was an agreement solely between plaintiff and defendants, or
defendants and third party plaintiffs and third party defendants dealing solely
with the Paramount Theatre Los Angeles alone and the exhibition thereat; third
party plaintiffs, and each of them, cannot recover upon the first, second and
fourth counterclaim, or any of them.'5

14

The court simultaneously entered an order giving judgment for Partmar on

Paramount's two counts of unlawful detainer, declaring the rights and duties of
the parties under the franchise and the lease, and dismissing with prejudice

Partmar's three treble damage counterclaims.

15

Partmar, apparently not wishing to jeopardize its valuable lease and franchise,
took no appeal from parts of the District Court's judgment declaring the lease
and franchise to be valid and subsisting and the theatre not to be unlawfully
detained.6 Therefore those parts of the judgment must be accepted as valid and
binding on the parties. Partmar did, however, serve timely notice of appeal to
the Court of Appeals for the Ninth Circuit from so much of the District Court
judgment as dismissed with prejudice the treble damage counterclaims. The
Court of Appeals for the Ninth Circuit, in a per curiam opinion on December
16, 1952, 200 F.2d 561, noted agreement with the opinion of the District Court
and affirmed the District Court judgment. As heretofore indicated, our
consideration is 'limited to the issue of the counterclaims.'

16

Partmar contends that the District Court erred in dismissing its counterclaims
with prejudice without a separate trial as to their merits, which the trial court
had previously ordered, and that such dismissal deprived it of due process of
law. In particular, it argues that it was denied the valuable property right of
having admitted in evidence during a trial the judgment in the case of United
States v. Paramount Pictures, Inc., 334 U.S. 131, 68 S.Ct. 915, 92 L.Ed. 1260,
which, it argues, would provide, under 5 of the Clayton Act, 38 Stat. 731, 15
U.S.C. 16, 15 U.S.C.A. 16, prima facie evidence of the conspiracy on which
the counterclaims were based. We think these contentions are without merit.
The power remained in the trial court until the entry of his final judgment to set
aside, for appropriate reasons, the former order for separate trial of the
counterclaims.

17

Each of Partmar's counterclaims for treble damages was predicated upon

allegations that Paramount and its alleged co-conspirators engaged in a
conspiracy in restraint of trade and commerce, and that the allegedly 'excessive
terms, conditions and charges for the photo-plays made and released by them'
and the exaction of fifty percent of the net receipts, imposed by the lease and
franchise agreement, were part of such conspiracy. The District Court found in
the principal action, which decision was not appealed and is not before us, that
neither the lease nor the franchise was the result 'of any agreement,
combination or conspiracy of any kind whatsoever.' Of course, if this finding
were not material to the principal action the doctrine of collateral estoppel
would not apply. But this finding was obviously necessary to the court's
judgment that the agreements were not illegal. Partmar had ample opportunity
upon trial to present evidence and to contest the conspiracy finding, and
argument was heard prior to adoption of the findings. This finding, binding all
of the parties, determined the key ingredient of Partmar's counterclaims

contrary to its allegations and thus precluded recovery upon such claims. A
separate trial on the counterclaims would have been improper procedure as the
judgment entered on the complaint was a final disposition of the determinative
issue on the counterclaimswhether or not the terms of the lease were a
product of an illegal conspiracy.7
18

The allegations of the counterclaim charge that as a result of 'the same

conspiracy stated in the complaint' in United States v. Paramount Pictures, Inc.,
334 U.S. 131, 68 S.Ct. 915, 92 L.Ed. 1260, Partmar was damaged in the terms
of its lease from Paramount. Yet this very lease was sustained by the judgment
in this case on the ground that it was not violative of the Sherman Act. Partmar
moved to dismiss the complaint in this case after this Court's decision in the
Paramount Pictures case on the ground that it 'had become moot by the
demonstrated non-existence of the basic fact,' i.e., the illegality of the lease. In
its brief in the trial court, petitioner stated its position clearly.

19

'The effect of the opinion seems to be that franchises are not unlawful per se,
that is, apart from conspiracy, and that on the record in that case they were not
shown to have been parts of the conspiracy.

20

'The Supreme Court seems at least to have clearly indicated that a franchise
with one exhibitor for one theatre, like that with Partmar, was not involved in
the case. It said in effect that only franchises with defendants and franchises for
theatres in a circuit were involved.'

21

Nor would unlimited admission in evidence of the final decree in United States
v. Paramount Pictures Inc., supra, have aided Partmar. We had reversed the
only finding in that case pertaining to the illegality under the Sherman Act of
franchise agreements between exhibitors and producers, and the final consent
decree as to Paramount entered on March 4, 1949, contains no findings on such
subject. Cf. United States v. Paramount Pictures, D.C., 85 F.Supp. 881, 897.
Since final judgments or decrees in Government antitrust actions are admissible
under 5 of the Clayton Act as prima facie evidence only of issues actually
determined in the prior adjudication,8 the Government judgments provide no
proof of the indispensable element to Partmar's counterclaims, that the lease
and franchise were part of or the result of a conspiracy. From the decree there
would have been prima facie evidence of a conspiracy but no evidence that the
Partmar lease was a result of that conspiracy so as to overturn the trial court's
finding in this very proceeding that no illegality tainted the lease. Partmar,
therefore, was not prejudiced by the fact that the District Court did not consider
either the judgment or the decree as evidence of the conspiracy alleged in the
counterclaims. As we have pointed out, the conclusion of the trial court went

beyond the lawfulness of the 'franchise,' as distinguished from the lease of

which it was a part and held that the lease was not secured by conspiracy. See
74 S.Ct. 419, supra. This was res judicata of that fact, if it be considered a fact
and nonetheless res judicata if it is a decision on the law, binding in another
cause of action arising from the same controversy or claim.9
22

Affirmed.

23

Mr. Justice JACKSON and Mr. Justice CLARK took no part in the
consideration or decision of this case.

24

Mr. Chief Justice WARREN, whom Mr. Justice BLACK joins, dissenting.

25

I cannot join in the Court's decision. Relying on the doctrine of collateral

estoppel, it affirms the trial judge's dismissal of petitioner's treble damage
counterclaims without a trial. The doctrine, I believe, is inapplicable to the facts
of this case.

26

The Court correctly states the wellsettled rule that a prior judgment on a
different cause of action is not conclusive as to questions which might have
been but were not actually litigated in the original action.1 The inquiry,
therefore, must be whether the conspiracy issue was actually litigated in the
eviction suit; if it was not so litigated, the District Court's finding as to the
absence of evidence of conspiracy cannot preclude petitioner on its
counterclaims. The Court rests its decision on the assumptions (1) that the
conspiracy issue was litigated in the eviction suit and (2) that in any event
petitioner had a full opportunity to litigate the issue. Neither assumption, it
seems to me, is warranted by the facts. To those facts I now turn.

27

The respondent, Paramount, sought to take advantage of its own violation of

the federal antitrust laws by bringing an eviction suit to cancel a valuable lease
held by its tenant, the petitioner, on a Los Angeles theatre. The lease provided
that it was terminable if, 'for any reason whatsoever,' petitioner's franchise for
the showing of Paramount's pictures should be 'cancelled or terminated.'
Paramount, in its complaint charging unlawful detainer, did not allege in any
respect that the franchise was invalid because part of a conspiracy; rather, the
crux of the complaint was that the franchise had been terminated by the District
Court decree in the Government antitrust action against Paramount and others.
United States v. Paramount Pictures, Inc., D.C., 66 F.Supp. 323, D.C., 70
F.Supp. 53. After the eviction complaint had been filed, the decree in the
Government action was reviewed here; the Court sustained the decree as to the

existence of a nationwide conspiracy among the defendants, but reversed that

portion of the decree which held that franchises were illegal per se. 334 U.S.
131, 155156, 68 S.Ct. 915, 928, 92 L.Ed. 1260. Petitioner moved to dismiss,
contending that the basis of the eviction complaint had been swept away by this
Court's decision. In opposing the motion to dismiss, Paramount made an aboutface and urged the illegality of the franchise on other grounds: its minimum
price requirements, block booking, and restrictions on runs and clearances.
Paramount alleged that these provisions of the franchise agreement, apart from
any conspiracy and independent of the decree in the Government action,
rendered the agreement an illegal 'contract * * * in restraint of trade' under the
Sherman Act. This new theory of the case was accepted by the trial court
without any change in the pleadings, and the motion was denied.
28

In its answer, petitioner set up as a defense that Paramount was seeking to evict
petitioner in pursuance of the conspiracy enjoined in United States v.
Paramount Pictures, Inc., supra, and that the effect of an eviction would be to
drive petitioner out of business and thus enable Paramount to extend an
unlawful monopoly over motion picture theatres. On Paramount's motion, the
defense was stricken as an improper collateral attack on the right of the lessor
to recover possession of the theatre.

29

The answer also contained petitioner's counterclaims, alleging that Paramount

and others named as cross-defendants had engaged in the conspiracy enjoined
in United States v. Paramount Pictures, Inc., supra, and that by reason of this
market control Paramount had been able to exact from petitioner monopoly
profits in the form of overcharges for theatre and film rentals. Treble damages
and injunctive relief were sought. On Paramount's motion to dismiss the
counterclaims, they were sustained as valid actions under the antitrust laws.2

30

Both actionsthe eviction suit and the counterclaimswere then ready for
trial. Paramount moved that the two actions be tried separately. Petitioner
consented and the court so ordered, the eviction suit to be tried first.

31

Throughout the lengthy trial of the eviction suit, the trial judge repeatedly
complained of the total absence of any evidence showing that the franchise was
part of a conspiracy. His complaint went unheeded. Paramount, which had the
burden of proof in the eviction suit, not only failed to introduce such evidence
but never even alleged such a conspiracy. Petitioner, on the other hand, never
denied the existence of the conspiracy, but argued that the franchise in itself
was not invalid.3 And both times that petitioner sought to inject the conspiracy
issue into the case, it was prevented from doing so. As I have already noted,
petitioner's answer alleged that the eviction suit was brought in pursuance of

the conspiracy; on Paramount's motion, the defense was stricken. Later when
Paramount offered into evidence the decree in the Government action for the
limited purpose of showing Paramount as being subject to the injunctive
features of the decree, petitioner objected on the ground that the decree 'should
go in as a document in totono part of it but the whole thing.' In support of the
objection, petitioner argued that 5 of the Clayton Act4 made the decree prima
facie evidence of the conspiracy established in the Government action. Again
petitioner was overruled.
32

At the conclusion of the eviction trial, the court gave judgment for petitioner
because of Paramount's failure to show the illegality of the franchise by
evidence of conspiracy. As to the counterclaims, the court stated:5

33

'At the time of trial it was agreed that action on the counter-claims should be
postponed until after the trial of the main issue involved and no evidence was
offered by either plaintiff or defendant on the counter-claims.'

34

Nevertheless, the court dismissed the counterclaims without trial on the ground
that there was '* * * no substantial evidence of a conspiracy in this case on the
part of Partmar or Paramount * * *.'6 The court thus disposed of both the
eviction suit and the counterclaims on the same groundthe absence of any
evidence of conspiracy.

35

I submit that on these facts the Court's two assumptions are unwarranted. The
issue of conspiracy was not litigated; nor did petitioner have a fair opportunity
to litigate the issue. Indeed, whether petitioner had an opportunity to do so is
immaterial under the doctrine of collateral estoppel. If the counterclaims had
been based on the same cause of action as the eviction suit, such an opportunity
might have barred petitioner under the more sweeping doctrine of res judicata.
But here, where the second suit is based on a different cause of action, a
neglected opportunity in the first action to litigate an issue is without legal
significance.7

36

Under these circumstances, should the doctrine of collateral estoppel be

invoked against petitioner to bar a trial on its counterclaims? I believe not. The
doctrine presupposes, and the Constitution requires, that the party who is
estopped had his day in court in a prior action and that he then had a fair
hearing in which to prove his point but failed. Surely the doctrine was never
intended to estop a party who in the prior action was denied such a hearing.

37

That, as I see it, is precisely the situation here. The eviction suit and

counterclaims had been severed for trial purposes. During the trial of the
eviction suit, Paramount was the only party with any reason or justification for
proving that the franchise was part of a conspiracy. Because of Paramount's
failure to present such proof, the court held the lease to be valid, but at the
same time gave judgment against petitioner on its counterclaims because of the
same shortcoming of Paramount's proof. This Court now affirms. The
anomalous result is to penalize petitioner for refusing to help Paramount win
the eviction suit.
38

I believe that petitioner has been denied its day in court, and that the case
should be reversed with instructions to the trial court to hear the
counterclaims.8

Cromwell v. Sac County, 94 U.S. 351, 352, 24 L.Ed. 195; Fayerweather v.

Ritch, 195 U.S. 276, 300, 308, 25 S.Ct. 58, 64, 68, 49 L.Ed. 193; Gunter v.
Atlantic Coast Line R. Co., 200 U.S. 273, 290, 26 S.Ct. 252, 258, 50 L.Ed. 477;
Stoll v. Gottlieb, 305 U.S. 165, 59 S.Ct. 134, 83 L.Ed. 104.

Cromwell v. County of Sac, supra, 94 U.S. at page 353, 24 L.Ed. 195; United
States v. Moser, 266 U.S. 236, 241, 45 S.Ct. 66, 67, 69 L.Ed. 262; Treinies v.
Sunshine Mining Co., 308 U.S. 66, 74, 60 S.Ct. 44, 48, 84 L.Ed. 85;
Commissioner of Internal Revenue v. Sunnen, 333 U.S. 591, 597601, 68
S.Ct. 715, 719, 721, 92 L.Ed. 898. Cf. Federal Trade Commission v. Cement
Institute, 333 U.S. 683, 706, 68 S.Ct. 793, 806, 92 L.Ed. 1009, where the rule is
recognized but its application denied because the issues differed.

See Scott, Collateral Estoppel by Judgment, 56 Harv.L.Rev. 1; Note Collateral

Estoppel by Judgment, 52 Col.L.Rev. 647.

Petitioner's first counterclaim alleged:

'Paramount Pictures Theatres Corporation, Paramount Pictures, Inc., Paramount
Film Distributing Corporation, * * * and the defendants in United States of
America v. Paramount Pictures, Inc., Equity No. 87273, in the United States
District Court for the Southern District of New York, and other persons to the
defendants unknown, were, at the time of the acts and transactions stated in the
complaint herein, and they now are, engaged in a conspiracy in restraint of
trade and commerce among the States, in the distribution and exhibition of
motion pictures, in violation of the Act of July 2, 1890, that is to say, the same
conspiracy stated in the complaint in that case.
'32. This action has been brought by the plaintiff in pursuance of the aforesaid

conspiracy, arrangements and agreements, and to evade and defeat the purpose
to end the aforesaid conspiracy and restraint of trade for which United States of
America v. Paramount Pictures, Inc., Equity No. 87273, was instituted.
'33. As part of the aforesaid conspiracy, the plaintiff and the third-party
defendants arranged and agreed among themselves, to require Partmar
Corporation to license for exhibition at the Paramount Theatre for 46 weeks of
each year, only photoplays made and released by Paramount Pictures, Inc., and,
for any failure upon the part of Partmar Corporation to obey that requirement,
to evict it from Paramount Theatre. The plaintiff, and the third-party defendants
have been able to impose, and they have in fact imposed, upon Partmar
Corporation, excessive terms, conditions and charges for the photoplays made
and released by them and exhibited at the Paramount Theatre, from March 2,
1933, to the present time.'
In the second counterclaim, the third party plaintiffs (petitioners) reiterated their
allegations of conspiracy and based their claim for damages on an addition to
the lease that required Partmar 'to pay an additional sum; that is to say, fifty per
cent of the net receipts of Partmar Corporation at the Paramount Theatre.'
The other counterclaim is not in the record but the briefs indicate that it
contained substantially the same allegation as numbers one and two.
5

Partmar had brought in other parties as third party defendants under Fed.Rules
Civ.Proc. 14, 28 U.S.C.A. Their presence is not important in this phase of the
controversy.

While Partmar did not appeal, it might have. The finding and conclusion of law
just quoted were essential to the determination of Paramount's claim for
possession of the theatre. Paramount's position after this Court's reversal of the
franchise portion of the New York decree, was that the agreements were invalid
under the federal antitrust statutes as the product of an illegal conspiracy. It is
only when a finding of law or fact is not necessary for a decree that the
prevailing party may not appeal and the finding does not form the basis for
collateral estoppel. This is shown by the case cited to support the statement as
to appeal in Lindheimer v. Illinois Bell Telephone Co., 292 U.S. 151, 176, 54
S.Ct. 658, 668, 78 L.Ed. 1182. See New York Telephone Co. v. Maltbie, 291
U.S. 645, 54 S.Ct. 443, 78 L.Ed. 1041, and cases cited. Electrical Fittings Corp.
v. Thomas & Betts Co., 307 U.S. 241, 59 S.Ct. 860, 83 L.Ed. 1263, stated the
practice negatively. 'A party may not appeal * * * findings * * * not necessary
to support the decree.' Professor Scott, supra, note 3, at page 12, concurs in this
view. Restatement, Judgments, 68, reads: '(1) Where a question of fact
essential to the judgment is actually litigated and determined by a valid and

final judgment, the determination is conclusive between the parties in a

subsequent action on a different cause of action, except as stated in 69, 71
and 72.' Section 69(2) ('Where a party to a judgment cannot obtain the decision
of an appellate court because the matter determined against him is immaterial
or moot, the judgment is not conclusive against him in a subsequent action on a
different cause of action.') is immaterial because the conspiracy determination
was essential for Partmar's defense to Paramount's claim. See Galloway v.
General Motors Acceptance Corp., 4 Cir., 106 F.2d 466. The paucity of cases in
this field is explainable by the infrequent happening of a need of a prevailing
party to set aside a determination necessary to a judgment in his favor.
7

Southern Pacific R. Co. v. United States, 168 U.S. 1, 48 49, 18 S.Ct. 18, 27, 42
L.Ed. 355:
'The general principle announced in numerous cases is that a right, question, or
fact distinctly put in issue, and directly determined by a court of competent
jurisdiction, as a ground of recovery, cannot be disputed in a subsequent suit
between the same parties or their privies; and, even if the second suit is for a
different cause of action, the right, question, or fact once so determined must, as
between the same parties or their privies, be taken as conclusively established,
so long as the judgment in the first suit remains unmodified.'

Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 568569, 71
S.Ct. 408, 413414, 95 L.Ed. 534:
'We think that Congress intended to confer, subject only to a defendant's
enjoyment of its day in court against a new party, as large an advantage as the
estoppel doctrine would afford had the Government brought suit.
'The evidentiary use which may be made under 5 of the prior conviction of
respondents is thus to be determined by reference to the general doctrine of
estoppel. * * * Accordingly, we think plaintiffs are entitled to introduce the
prior judgment to establish prima facie all matters of fact and law necessarily
decided by the conviction and the verdict on which it was based.'
See Theatre Enterprises v. Paramount, 346 U.S. 537, 74 S.Ct. 257; Monticello
Tobacco Co., Inc. v. American Tobacco Co., 2 Cir., 197 F.2d 629.

United States v. Moser, 266 U.S. 236, 242, 45 S.Ct. 66, 67, 69 L.Ed. 262:
'The contention of the government seems to be that the doctrine of res judicata
does not apply to questions of law; and, in a sense, that is true. It does not apply
to unmixed questions of law. Where, for example, a court in deciding a case has
enunciated a rule of law, the parties in a subsequent action upon a different

demand are not estopped from insisting that the law is otherwise, merely
because the parties are the same in both cases. But a fact, question or right
distinctly adjudged in the original action cannot be disputed in a subsequent
action, even though the determination was reached upon an erroneous view or
by an erroneous application of the law.'
Emich Motors Corp. v. General Motors Corp., 340 U.S. 558, 569, 71 S.Ct. 408,
414, 95 L.Ed. 534; Cf. United States v. Stone & Downer Co., 274 U.S. 225,
230, 47 S.Ct. 616, 71 L.Ed. 1013.
1

Cromwell v. Sac County, 94 U.S. 351, 353, 24 L.Ed. 195. See also
Restatement, Judgments, 68; Scott, Collateral Estoppel by Judgment, 56
Harv.L.Rev. 1, 23, 56; Note, Collateral Estoppel, 52 Col.L.Rev. 647, 652
657; Developments in the Law, Res Judicata, 65 Harv.L.Rev. 818, 840841;
Von Moschzisker, Res Judicata, 38 Yale L.J. 299, 311312; Cleary, Res
Judicata Re-examined, 57 Yale L.J. 339, 342343; Freeman, Judgments (5th
ed.) 674676.

38 Stat. 731, 15 U.S.C. 15, 15 U.S.C.A. 15.

The Court's opinion, apparently for the purpose of showing that the conspiracy
issue was actually litigated, points to statements in petitioner's trial brief to the
effect that Paramount had failed to establish a conspiracy in restraint of
interstate commerce. It is difficult to understand how petitioner's argument at
the trial that the conspiracy issue was not litigated can now be converted into
proof that the issue was litigated. Petitioner's statements in its brief amounted to
nothing more than a wholly justifiable contention that Paramount had failed in
its burden of proof in the eviction suit; the statements merely pointed out that
the franchise was valid in the absence of evidence of conspiracy and that
Paramount had not even alleged a conspiracyby pleadings, evidence, or oral
argument.

38 Stat. 731, 15 U.S.C. 16, 15 U.S.C.A. 16.

D.C., 97 F.Supp. 552, 561.

Ibid.

See note 1, supra.

There is yet an additional reason for not applying the doctrine of collateral
estoppel here. Petitioner, as the successful party in the eviction suit, could not
appeal the District Court's finding that there was no evidence of conspiracy.
Lindheimer v. Illinois Bell Telephone Co., 292 U.S. 151, 176, 54 S.Ct. 658,

668, 78 L.Ed. 1182; New York Telephone Co. v. Maltbie, 291 U.S. 645, 54
S.Ct. 443, 78 L.Ed. 1041. The adverse finding was not included in the Court's
decree, as in Electrical Fittings Corp. v. Thomas & Betts Co., 307 U.S. 241, 59
S.Ct. 860, 83 L.Ed. 1263. Because of this inability to appeal, the finding cannot
bind petitioner in a subsequent action between the parties based upon a different
cause of action. See Restatement, Judgments, 69(2); Scott, Collateral
Estoppel by Judgment, 56 Harv.L.Rev. 1, 1518.
The Court's opinion (footnote 6) concedes that inability to appeal precludes a
subsequent application of collateral estoppel, but contends that petitioner could
have appealed here because the trial court's finding in the eviction suit (as to
the absence of proof of conspiracy) was material to the decree in the eviction
suit. The Court's opinion cites no case, in this Court or any other, holding that a
successful party can appeal findings which are not inserted as part of the
decree. Indeed, the opinion overlooks the very holdings of this Court on which
it relies for support. In both Lindheimer v. Illinois Bell Telephone Co., supra,
and New York Telephone Co. v. Maltbie, supra, the findings which the public
utility sought to appeal related to the value of its property for rate-making
purposes; in each case, the trial court had held that the rates fixed by a state
commission were confiscatory on the basis of those findings. Yet this Court
held that the public utility, as the successful party, could not appeal those
findings. Surely in this case the trial judge's finding as to conspiracy was no
more 'material' than the findings which this Court refused to review in
Lindheimer and Maltbie.